Recently, there have been quite a few discussions in the exchange community about USDD—what's really going on? How does it differ from USDT and USDC? Should you get on board? Where do the returns come from? And what are the risks?

I’ve looked into on-chain data and recent project developments to share some personal observations.

USDD is an over-collateralized stablecoin, which determines its core features and approach. Unlike USDT, which is centrally managed, or USDC, which relies on compliant reserves—USDD requires users to lock over 100% of the value in crypto assets to mint, directly affecting its supply, liquidity, and cost structure.

From a yield perspective, USDD’s earning mechanisms mainly come from two channels: first, platform incentives and subsidies for stablecoin holders; second, APY from participating in liquidity mining. But it’s important to understand—these yields’ sustainability depends on the project’s reserve funds and market demand. If popularity wanes or subsidies stop, yields can decline rapidly.

What about risks? First, liquidation risk—during sharp price swings of collateral assets, some positions may be forcibly liquidated, which can trigger chain reactions impacting the entire ecosystem’s stability. Second, liquidity risk—trading depth is less than USDT and USDC, so large deposits or withdrawals may face slippage. Additionally, technical risks of the project itself and policy risks must also be considered.

Should you participate? It depends on your risk tolerance and holding period. For short-term gains, small-scale testing is fine, but don’t go all-in. For the long term, the stability of USDT and USDC is generally more reliable.